IRS Tax Debt Relief for Arizona Tax Payers
Tax debt is a problem that plagues many Arizona residents. And it can seriously affect small business owners. Unlike other kinds of consumer debt (credit card debt, mortgage debt, etc.) the IRS has special powers that make it one of the most aggressive debt collectors on the planet.
In most cases, the IRS does not need to take you to court in order to collect tax debt. Once the tax has been “assessed” that’s pretty much it. They can then start processes to levy bank accounts, lien properties, garnish wages, etc. There are some administrative processes involved, and you may have an opportunity to appeal certain of those processes, but the game is on at that point. Things can happen very quickly and seemingly without warning.
Dealing with the IRS or other tax agency on your own can be daunting and unproductive. If you have serious tax debt problems, it is best to have your situation evaluated by a tax debt attorney. Steve Brechner has been practicing tax law for many years in Arizona and has represented numerous tax debtors in the state. He can quickly evaluate your situation and help put together a game plan to get the IRS off your back. Here are some of the situations and strategies that may apply.
Stop IRS Tax Levy
It is a horrible feeling to go to your bank one day and find out your checking account has been cleaned out by the IRS. This is just one of the many powers the IRS has if you are in serious tax debt.
Once you have a levy in place, whether it be for the cash in your account, or your wages, it could remain in place until the debt is satisfied. If you have a large debt, this could cripple you for years to come.
Fortunately, there are options to stop a tax levy. One of the most powerful ways is to use the bankruptcy laws to immediately stop the levy through the “automatic stay” that comes with a bankruptcy filing. Depending on your overall debt situation, bankruptcy may or may not make sense for you. But if you have substantial tax debt, bankruptcy should be considered as on option. For more on the power of bankruptcy to relieve tax debt, see the section below.
IRS Tax Payment Plans
Another option may be to negotiate a payment plan, or installment plan, with the IRS or taxing agency. If you have a source of ongoing income, this may be a viable option. And it could give you the breathing room you need to handle your tax debt without worrying about levies and other aggressive collection tactics.
IRS Offer in Compromise
In some cases, a formal Offer in Compromise may make sense. An Offer in Compromise, or OIC, is designed to allow you to reduce the total debt amount and pay off the tax debt in a structured way, usually over time with a down payment. The main benefit of an OIC is to significantly reduce the total amount you have to pay and have the balance forgiven.
Of course, this can be a difficult solution to pull off. There are several possible reasons the IRS may consider approving an Offer in Compromise. But the most common factor is if they believe the debt is not reasonably collectible. The IRS has various formulas they employ to determine this, and they look at your income, budget expenses, etc.
Unfortunately, Offers in Compromise are not always accepted and the IRS is notoriously difficult to work with. If you are unable to reach an agreement on an OIC, you may have to consider other options like bankruptcy.
Discharge Tax Debt in Bankruptcy
Most people want to avoid bankruptcy, and rightfully so. But the bankruptcy laws are the great equalizer for many. The bankruptcy laws are so powerful in protecting consumers and small business owners, that sometimes it is the only realistic solution in dealing with IRS tax debt.
The bankruptcy laws can offer many benefits to a tax debtor. But two of the most powerful are the automatic stay and the discharge of tax debt.
First, as mentioned above, the moment you file bankruptcy, the “automatic stay” takes affect. This is a federal law that requires all collection activity to stop the moment you file. This includes the IRS and taxing agencies. It is one of the few laws/tools that can bring the IRS to heel. This means that all levies, garnishments, and other collection activity must immediately stop. This can give you some much-needed breathing room and protect assets.
Second, contrary to popular belief, tax debt may actually be dischargeable in some circumstances. There are many rules and exceptions in this area of the law.
The 3 Year, 2 Year, 240 Day Rule for Discharge of Tax Debt
This bankruptcy rule says that you can discharge tax debt that came due 3 years before filing bankruptcy, as long as it has been at least 2 years since you filed the tax returns and 240 days since the taxes were assessed. So this may not help if your tax debt is very fresh, but for many people, this rule will allow them to discharge a significant portion of their tax debt.
We can also help with other state and local taxing authorities. Contact us today to have your tax debt evaluated.